MERRILL LYNCH
OREGON
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 1998
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch Oregon
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended July 31, 1998, long-term tax-exempt
revenue bond yields were little changed. Throughout the period, the
near absence of inflationary pressures continued to support low
interest rates. However, consistently strong domestic economic
growth has caused some investors to fear that the Federal Reserve
Board will be forced eventually to raise short-term interest rates.
Such action would be taken to ensure that the US economy's present
rate of growth would decelerate before any inflationary pressures
could develop. These concerns pushed bond yields modestly higher by
late April.
However, the weakening financial conditions in many Asian countries
subsequently calmed investor fears of Federal Reserve Board
intervention, and fixed-income prices again moved higher. Long-term
uninsured municipal bond yields, as measured by the Bond Buyer
Revenue Bond Index, rose less than 5 basis points (0.05%) to end the
July quarter at 5.36%. As in late 1997 and early 1998, US Treasury
bond yields benefited from a "flight to quality" as foreign
investors were drawn to the relative safe haven of US Government
securities. Long-term US Treasury bond yields declined approximately
10 basis points to end the July quarter at 5.71%.
Thus far in 1998, the municipal bond market has experienced
unexpectedly strong supply pressures. These supply pressures have
prevented tax-exempt bond yields from declining as much as US
Treasury bond yields. During the first six months of 1998, more than
$153 billion in new tax-exempt bonds were underwritten, an increase
of almost 50% compared to the same period a year ago. During the
quarter ended July 31, 1998, municipalities issued over $75 billion
in new securities, an increase of more than 35% compared to the same
three-month period in 1997. Additionally, corporate issuers have
also viewed current interest rate levels as an opportunity to issue
significant amounts of taxable securities. Thus far in 1998, over
$500 billion in investment-grade corporate bonds have been
underwritten, an increase of more than 70% compared to the same
period a year ago. This sizeable corporate bond issuance has tended
to both support generally higher fixed-income yields and reduce the
demand for tax-exempt bonds.
However, the recent pace of new municipal bond issuance is unlikely
to be maintained. Continued increases in bond issuance will require
lower and lower tax-exempt bond yields to generate the economic
savings necessary for additional municipal bond refinancings.
Preliminary estimates for 1998 total municipal bond issuance are in
the $200 billion--$225 billion range. These estimates suggest that
recent supply pressures are likely to abate later in the year.
Earlier this year, municipal bond investors received approximately
$30 billion in coupon payments, bond maturities and proceeds from
early redemptions. The demand generated by these assets has helped
to offset the increase in supply seen thus far in 1998.
The continued impact of the Asian financial crisis on the US
domestic economy's future growth remains unclear. Current Asian
economic conditions continue to reflect ongoing weakness. Recent
trade data indicated that reduced US exports to these countries may
have lowered US economic growth by as much as 2% in the first
quarter of 1998. Since further trade deterioration is possible in
the coming months, we do not believe that the Federal Reserve Board
will be willing to raise interest rates, barring a dramatic and
unexpected resurgence of domestic inflation.
These factors suggest that over the near term, interest rates are
unlikely to rise by any appreciable amount. Recent supply pressures
have caused municipal bond yield ratios to rise relative to US
Treasury bond yields. At July 31, 1998, long-term tax-exempt bond
yields were at attractive yield ratios relative to US Treasury
securities of comparable maturities (over 90%), well in excess of
their expected range of 85%--88%. Tax-exempt bond yield ratios
rarely exceeded 90% in the 1980s and 1990s. Previous instances have
usually been associated with potential changes in Federal tax code
that would have adversely affected the tax-favored status of
municipal bonds. The present situation has developed largely because
of a temporary supply imbalance. These imbalances should soon be
corrected as tax-exempt bond issuance slows from its current rapid
pace later this year. Any further pressure on the municipal market
may well represent a very attractive investment opportunity.
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
Portfolio Strategy
During the six months ended July 31, 1998, our investment outlook
for Merrill Lynch Oregon Municipal Bond Fund was basically
constructive. The deterioration in the Asian economies helped keep
interest rates low, even in the face of strong domestic economic
growth. This combination of strong growth and low inflation has kept
bond yields within a rather narrow trading range over the past six
months.
Issuance of new Oregon municipal bonds increased by more than 52%
compared to the same six-month period a year ago. Total municipal
issuance increased by approximately 48% over the same period.
Municipal bonds continued to underperform US Treasury securities
because of the large issuance of tax-exempt securities.
Throughout the six-month period, we maintained a fully invested
position. We used periods of volatility to add additional interest
rate-sensitive issues, and we invested in new issues to increase
call protection and increase the Fund's duration.
Looking ahead, we believe that the interest rate outlook is positive
for the remainder of the year. We expect to maintain our current
strategy in order to participate in a lower interest rate
environment. Any signs of increasing interest rates or a resolution
to Asian economic problems will cause us to move toward a more
defensive position.
Fiscal Year in Review
During the fiscal year ended July 31, 1998, total municipal issuance
increased by more than 40% compared to the same period last year,
while Oregon municipal issuance increased by more than 5% over the
same period. Both the tax-exempt and US Treasury markets experienced
a decline in yields, although the greater increase in tax-exempt
issuance resulted in municipal performance lagging that of US
Treasury securities.
Given the narrow trading range of the municipal bond market, we
maintained a neutral strategy going into the second half of 1997.
Several changes in the economy over the past 12 months have eased
our concerns for a higher interest rate environment. The Asian
economic crisis and the continued low inflation in the domestic
economy caused us to reassess our previous posture, which had been
more conservative. We maintained a fully invested position and
purchased interest rate-sensitive issues in anticipation of lower
interest rates. These strategies produced total returns of +5.93%,
+5.39%, +5.39% and +5.82% for the Fund's Class A, Class B, Class C
and Class D Shares, respectively, for the year ended July 31, 1998.
This compares to the Lipper Analytical Services, Inc. average total
return of +5.37% for similar Oregon tax-exempt funds during the same
12-month period.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Oregon
Municipal Bond Fund, and we look forward to serving your investment
needs in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Theodore R. Jaeckel Jr.)
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
September 11, 1998
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end load)
of 4% and bear no ongoing distribution or account maintenance fees.
Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 7/31/98
<S> <C> <C> <C> <C>
ML Oregon Municipal Bond Fund Class A Shares +5.93% +2.39% +29.83% 3.75%
ML Oregon Municipal Bond Fund Class B Shares +5.39 +2.26 +26.62 3.40
ML Oregon Municipal Bond Fund Class C Shares +5.39 +2.23 +32.31 3.30
ML Oregon Municipal Bond Fund Class D Shares +5.82 +2.37 +34.80 3.65
<FN>
*Investment results shown do not reflect sales charges; results
would be lower if a sales charge was included. Total investment
returns are based on changes in net asset values for the periods
shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date. The Fund's
inception dates are Class A and Class B Shares, 8/27/93 and Class C
and Class D Shares, 10/21/94.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
PERFORMANCE DATA (concluded)
Total Return Based on a $10,000 Investment--Class A Shares and Class
B Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
8/27/93** 7/98
ML Oregon Municipal Bond Fund++--
Class A Shares* $ 9,600 $12,464
ML Oregon Municipal Bond Fund++--
Class B Shares* $10,000 $12,662
Lehman Brothers Municipal Bond
Index++ $10,000 $13,410
Total Return Based on a $10,000 Investment--Class C and Class D
Shares
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
10/21/94** 7/98
ML Oregon Municipal Bond Fund++--
Class C Shares* $10,000 $13,231
ML Oregon Municipal Bond Fund++--
Class D Shares* $ 9,600 $12,941
Lehman Brothers Municipal Bond
Index++ $10,000 $13,837
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++ML Oregon Municipal Bond Fund invests primarily in long-term
investment-grade obligations issued by or on behalf of the state of
Oregon, its political subdivisions, agencies and instrumentalities
and obligations of other qualifying issuers.
++++This unmanaged Index consists of long-term revenue bonds,
prerefunded bonds, general obligation bonds and insured bonds. The
starting date for the Index in the Class A & Class B Shares graph is
8/31/93 and in the Class C &Class D Shares graph is 10/31/94.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/98 +8.74% +4.39%
Inception (8/27/93)
through 6/30/98 +5.47 +4.59
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/98 +8.08% +4.08%
Inception (8/27/93)
through 6/30/98 +4.94 +4.94
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/98 +8.08% +7.08%
Inception (10/21/94)
through 6/30/98 +7.81 +7.81
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/98 +8.52% +4.18%
Inception (10/21/94)
through 6/30/98 +8.34 +7.15
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Oregon Municipal Bond
Fund's portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to the
list at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
PCR Pollution Control Revenue Bonds
S/F Single-Family
STRIPES Short-Term Inverse Payment Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Oregon--80.4%
<S> <S> <C> <S> <C>
AAA Aaa $ 900 Chemeketa, Oregon, Community College District, UT, 5.95% due 6/01/2006 (e)(g) $ 998
AAA Aaa 300 Colombia River, Oregon, Peoples Utility District, Refunding, UT, 5% due
6/01/2006 (d) 312
BBB+ NR* 900 Klamath Falls, Oregon, Intercommunity Hospital Authority Revenue Bonds
(Gross-Merle West Medical Center Project), Series A, 7.10% due 9/01/2024 1,005
AAA Aaa 500 Lincoln County, Oregon, School District, UT, 5.25% due 6/15/2012 (e) 521
AAA Aaa 870 Marion County, Oregon, Union High School District No. 007J (Silverton),
UT, 7% due 6/01/2004 (c)(g) 1,002
AAA Aaa 850 Morrow County, Oregon, School District No. 001, UT, 6% due 6/01/2007 (b) 947
AAA Aaa 500 Multnomah County, Oregon, Educational Facilities Revenue Refunding Bonds
(University of Portland Project), 5.10% due 4/01/2013 (d) 508
AAA Aaa 2,650 Oregon Health Sciences University Revenue Bonds, Insured Series A, 5.75%**
due 7/01/2021 (b) 813
NR* Baa2 500 Oregon State Economic Development Revenue Refunding Bonds (Georgia Pacific
Corp. Project), Series 183, 5.70% due 12/01/2025 516
Oregon State Health, Housing, Educational and Cultural Facilities Authority
Revenue Bonds, Series A:
NR* VMIG1++ 500 (Guide Dogs for the Blind), VRDN, 3.60% due 7/01/2025 (a) 500
A+ NR* 500 Refunding (Reed College Project), 5.375% due 7/01/2025 508
AA Aaa 850 Oregon State Higher Education Building Improvement Bonds, UT, Series A,
6.45% due 8/01/2004 (g) 957
NR* Aa2 1,000 Oregon State Housing and Community Services Department, Mortgage Revenue
Bonds, AMT, Series A, 6.20% due 7/01/2027 1,061
Oregon State Housing and Community Services Department, Mortgage Revenue
Bonds (S/F Mortgage Program):
NR* Aa2 1,000 AMT, Series E, 7.10% due 7/01/2014 1,069
NR* Aa2 475 Refunding, Series A, 6.40% due 7/01/2018 505
NR* Aa2 1,050 Series B, 6.875% due 7/01/2028 1,121
Port of Portland, Oregon, International Airport Revenue Bonds (Portland
International Airport), AMT, Series 7B (b):
AAA Aaa 950 7.10% due 1/01/2012 (g) 1,153
AAA Aaa 50 7.10% due 7/01/2021 54
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Oregon (concluded)
<S> <S> <C> <S> <C>
Port Umpqua, Oregon, PCR, Refunding (International Paper Co. Projects):
BBB+ A3 $ 500 Series A, 5.05% due 6/01/2009 $ 511
BBB+ A3 500 Series B, 5.20% due 6/01/2011 509
A+ A1 1,500 Portland, Oregon, Sewer System Revenue Bonds, Series A, 6.25% due
6/01/2004 (g) 1,667
AAA Aaa 900 Tillamook County, Oregon, GO, UT, 6.25% due 1/01/2014 (e) 989
Puerto Rico--18.6%
AAA Aaa 2,720 Puerto Rico Commonwealth, GO, UT, 7% due 7/01/2010 (d) 3,311
A1+ VMIG1++ 200 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway
Revenue Bonds, VRDN, Series X, 3.20% due 7/01/1999 (a) 200
AAA Aaa 400 Puerto Rico Electric Power Authority, Power Revenue Bonds, STRIPES,
Series T, 7.863% due 7/01/2005 (c)(f) 472
Total Investments (Cost--$19,258)--99.0% 21,209
Other Assets Less Liabilities--1.0% 214
-------
Net Assets--100.0% $21,423
=======
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at July 31, 1998.
(b)MBIA Insured.
(c)FSA Insured.
(d)AMBAC Insured.
(e)FGIC Insured.
(f)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at July 31, 1998.
(g)Prerefunded.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of the purchase by the Fund.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$19,257,855) (Note 1a) $ 21,209,201
Cash 42,007
Receivables:
Interest $ 184,598
Beneficial interest sold 79,607 264,205
------------
Deferred organization expenses (Note 1e) 553
Prepaid registration fees and other assets (Note 1e) 2,069
------------
Total assets 21,518,035
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 14,224
Beneficial interest redeemed 13,296
Distributor (Note 2) 8,183
Investment adviser (Note 2) 3,854 39,557
------------
Accrued expenses and other liabilities 55,433
------------
Total liabilities 94,990
------------
Net Assets: Net assets $ 21,423,045
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 30,681
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 147,973
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 25,182
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 7,973
Paid-in capital in excess of par 21,793,367
Accumulated realized capital losses on investments--net (Note 5) (2,526,931)
Accumulated distributions in excess of realized capital gains on
investments--net (Note 1f) (6,546)
Unrealized appreciation on investments--net 1,951,346
------------
Net assets $ 21,423,045
============
Net Asset Value: Class A--Based on net assets of $3,102,662 and 306,810 shares of
beneficial interest outstanding $ 10.11
============
Class B--Based on net assets of $14,965,380 and 1,479,728 shares of
beneficial interest outstanding $ 10.11
============
Class C--Based on net assets of $2,548,733 and 251,823 shares of
beneficial interest outstanding $ 10.12
============
Class D--Based on net assets of $806,270 and 79,733 shares of
beneficial interest outstanding $ 10.11
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1998
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 1,224,384
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 122,200
Account maintenance and distribution fees--Class B (Note 2) 80,946
Professional fees 54,900
Accounting services (Note 2) 42,243
Printing and shareholder reports 21,090
Account maintenance and distribution fees--Class C (Note 2) 13,001
Registration fees (Note 1e) 8,687
Amortization of organization expenses (Note 1e) 7,770
Transfer agent fees--Class B (Note 2) 7,748
Pricing fees 3,482
Custodian fees 2,163
Trustees' fees and expenses 1,317
Transfer agent fees--Class A (Note 2) 1,243
Transfer agent fees--Class C (Note 2) 999
Account maintenance fees--Class D (Note 2) 622
Transfer agent fees--Class D (Note 2) 241
Other 2,513
------------
Total expenses before reimbursement 371,165
Reimbursement of expenses (Note 2) (77,763)
------------
Total expenses after reimbursement 293,402
------------
Investment income--net 930,982
------------
Realized & Realized gain on investments--net 156,351
Unrealized Change in unrealized appreciation on investments--net 108,099
Gain on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 1,195,432
(Notes 1b, ============
1d & 3):
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 930,982 $ 1,128,807
Realized gain on investments--net 156,351 504,081
Change in unrealized appreciation on investments--net 108,099 688,160
------------ ------------
Net increase in net assets resulting from operations 1,195,432 2,321,048
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (149,827) (170,118)
Shareholders Class B (666,069) (860,053)
(Note 1f): Class C (86,976) (86,440)
Class D (28,110) (12,196)
In excess of realized gain on investments--net:
Class A (966) --
Class B (4,806) --
Class C (593) --
Class D (181) --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (937,528) (1,128,807)
------------ ------------
Beneficial Net decrease in net assets derived from beneficial interest
Interest transactions (2,416,519) (4,784,283)
Transactions ------------ ------------
(Note 4):
Net Assets: Total decrease in net assets (2,158,615) (3,592,042)
Beginning of year 23,581,660 27,173,702
------------ ------------
End of year $ 21,423,045 $ 23,581,660
============ ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Period
The following per share data and ratios have been derived Aug. 27,
from information provided in the financial statements. 1993++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 9.52 $ 9.40 $ 9.41 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .47 .47 .48 .50 .48
Realized and unrealized gain (loss) on
investments--net .11 .48 .12 (.01) (.58)
-------- -------- -------- -------- --------
Total from investment operations .58 .95 .60 .49 (.10)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.47) (.47) (.48) (.50) (.48)
In excess of realized gain on
investments--net --+++++ -- -- -- (.01)
-------- -------- -------- -------- --------
Total dividends and distributions (.47) (.47) (.48) (.50) (.49)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.11 $ 10.00 $ 9.52 $ 9.40 $ 9.41
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 5.93% 10.27% 6.52% 5.54% (1.13%)+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .89% .78% .53% .31% .08%*
Net Assets: ======== ======== ======== ======== ========
Expenses 1.24% 1.22% 1.17% 1.23% 1.30%*
======== ======== ======== ======== ========
Investment income--net 4.62% 4.88% 5.06% 5.51% 5.26%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 3,103 $ 3,232 $ 3,904 $ 4,332 $ 6,712
Data: ======== ======== ======== ======== ========
Portfolio turnover 36.31% 40.62% 103.61% 142.77% 52.88%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
Period
The following per share data and ratios have been derived Aug. 27,
from information provided in the financial statements. 1993++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 9.52 $ 9.40 $ 9.41 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .42 .42 .44 .45 .43
Realized and unrealized gain (loss) on
investments--net .11 .48 .12 (.01) (.58)
-------- -------- -------- -------- --------
Total from investment operations .53 .90 .56 .44 (.15)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.42) (.42) (.44) (.45) (.43)
In excess of realized gain on
investments--net --+++++ -- -- -- (.01)
-------- -------- -------- -------- --------
Total dividends and distributions (.42) (.42) (.44) (.45) (.44)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.11 $ 10.00 $ 9.52 $ 9.40 $ 9.41
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 5.39% 9.72% 5.97% 5.00% (1.59%)+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.40% 1.29% 1.04% .84% .58%*
Net Assets: ======== ======== ======== ======== ========
Expenses 1.75% 1.73% 1.68% 1.75% 1.80%*
======== ======== ======== ======== ========
Investment income--net 4.11% 4.37% 4.55% 4.99% 4.75%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 14,965 $ 17,888 $ 21,542 $ 25,861 $ 25,943
Data: ======== ======== ======== ======== ========
Portfolio turnover 36.31% 40.62% 103.61% 142.77% 52.88%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. 1994++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 9.53 $ 9.40 $ 9.02
Operating -------- -------- -------- --------
Performance: Investment income--net .41 .41 .43 .34
Realized and unrealized gain on investments--net .12 .47 .13 .38
-------- -------- -------- --------
Total from investment operations .53 .88 .56 .72
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.41) (.41) (.43) (.34)
In excess of realized gain on investments--net --+++++ -- -- --
-------- -------- -------- --------
Total dividends and distributions (.41) (.41) (.43) (.34)
-------- -------- -------- --------
Net asset value, end of period $ 10.12 $ 10.00 $ 9.53 $ 9.40
======== ======== ======== ========
Total Investment Based on net asset value per share 5.39% 9.50% 5.97% 8.19%+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.50% 1.39% 1.16% 1.00%*
Net Assets: ======== ======== ======== ========
Expenses 1.85% 1.83% 1.79% 1.88%*
======== ======== ======== ========
Investment income--net 4.01% 4.28% 4.45% 4.68%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 2,549 $ 2,063 $ 1,555 $ 853
Data: ======== ======== ======== ========
Portfolio turnover 36.31% 40.62% 103.61% 142.77%
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. 1994++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 9.52 $ 9.39 $ 9.02
Operating -------- -------- -------- --------
Performance: Investment income--net .46 .46 .47 .38
Realized and unrealized gain on investments--net .11 .48 .13 .37
-------- -------- -------- --------
Total from investment operations .57 .94 .60 .75
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.46) (.46) (.47) (.38)
In excess of realized gain on investments--net --+++++ -- -- --
-------- -------- -------- --------
Total dividends and distributions (.46) (.46) (.47) (.38)
-------- -------- -------- --------
Net asset value, end of period $ 10.11 $ 10.00 $ 9.52 $ 9.39
======== ======== ======== ========
Total Investment Based on net asset value per share 5.82% 10.17% 6.52% 8.55%+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .99% .90% .63% .51%*
Net Assets: ======== ======== ======== ========
Expenses 1.34% 1.32% 1.28% 1.39%*
======== ======== ======== ========
Investment income--net 4.52% 4.76% 4.97% 5.12%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 806 $ 399 $ 173 $ 188
Data: ======== ======== ======== ========
Portfolio turnover 36.31% 40.62% 103.61% 142.77%
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Oregon Municipal Bond Fund (the "Fund") is part of
Merrill Lynch Multi-State Municipal Series Trust (the "Trust"). The
Fund is registered under the Investment Company Act of 1940 as a non-
diversified, open-end management investment company. The Fund offers
four classes of shares under the Merrill Lynch Select Pricing SM
System. Shares of Class A and Class D are sold with a front-end
sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of
such shares, and Class B and Class C Shares also bear certain
expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. The following is
a summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Trust, including
valuations furnished by a pricing service retained by the Trust,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Trust under the general supervision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a period not exceeding five years. Prepaid
registration fees are charged to expense as the related shares are
issued.
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for market discount.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or "Distributor"), a division of Princeton Funds
Distributor Inc. ("PFD"), which is a wholly-owned subsidiary of
Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion. For the year ended July 31, 1998, FAM earned
fees of $122,200, of which $77,763 was voluntarily waived.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended July 31, 1998, MLFD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Fund's Class D
Shares as follows:
MLFD MLPF&S
Class D $635 $5,952
For the year ended July 31, 1998, MLPF&S received contingent
deferred sales charges of $22,252 and $202 relating to transactions
in Class B and Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1998 were $8,268,433 and $7,628,641,
respectively.
Net realized gains for the year ended July 31, 1998 and net
unrealized gains as of July 31, 1998 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $156,351 $1,951,346
-------- ----------
Total $156,351 $1,951,346
======== ==========
As of July 31, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $1,951,346, of which $1,955,541 related to
appreciated securities and $4,195 related to depreciated securities.
The aggregate cost of investments at July 31, 1998 for Federal
income tax purposes was $19,257,855.
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $2,416,519 and $4,784,283 for the years ended July
31, 1998 and July 31, 1997, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 21,542 $ 216,132
Shares issued to shareholders
in reinvestment of dividends
and distributions 10,465 105,275
----------- -----------
Total issued 32,007 321,407
Shares redeemed (48,474) (489,222)
----------- -----------
Net decrease (16,467) $ (167,815)
=========== ===========
Class A Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 37,316 $ 360,520
Shares issued to shareholders
in reinvestment of dividends 11,762 113,681
----------- -----------
Total issued 49,078 474,201
Shares redeemed (135,962) (1,313,376)
----------- -----------
Net decrease (86,884) $ (839,175)
=========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 243,304 $ 2,448,833
Shares issued to shareholders
in reinvestment of dividends
and distributions 29,269 294,348
----------- -----------
Total issued 272,573 2,743,181
Automatic conversion of shares (9,123) (91,207)
Shares redeemed (573,060) (5,762,259)
----------- -----------
Net decrease (309,610) $(3,110,285)
=========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 209,679 $ 2,026,849
Shares issued to shareholders
in reinvestment of dividends 42,397 409,629
----------- -----------
Total issued 252,076 2,436,478
Automatic conversion of shares (10,731) (103,105)
Shares redeemed (715,041) (6,901,484)
----------- -----------
Net decrease (473,696) $(4,568,111)
=========== ===========
Class C Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 84,837 $ 854,906
Shares issued to shareholders
in reinvestment of dividends
and distributions 6,430 64,766
----------- -----------
Total issued 91,267 919,672
Shares redeemed (45,627) (455,409)
----------- -----------
Net increase 45,640 $ 464,263
=========== ===========
Class C Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 160,039 $ 1,543,944
Shares issued to shareholders
in reinvestment of dividends 6,578 63,646
----------- -----------
Total issued 166,617 1,607,590
Shares redeemed (123,601) (1,195,407)
----------- -----------
Net increase 43,016 $ 412,183
=========== ===========
Class D Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 34,763 $ 347,728
Automatic conversion of shares 9,124 91,207
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,199 12,078
----------- -----------
Total issued 45,086 451,013
Shares redeemed (5,310) (53,695)
----------- -----------
Net increase 39,776 $ 397,318
=========== ===========
Class D Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 10,153 $ 99,282
Automatic conversion of shares 10,732 103,105
Shares issued to shareholders
in reinvestment of dividends 872 8,438
----------- -----------
Total issued 21,757 210,825
Shares redeemed (1) (5)
----------- -----------
Net increase 21,756 $ 210,820
=========== ===========
5. Capital Loss Carryforward:
At July 31, 1998, the Fund had a net capital loss carryforward of
approximately $2,321,000, of which $1,088,000 expires in 2003 and
$1,233,000 expires in 2004. This amount will be available to offset
like amounts of any future taxable gains.
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Oregon Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Oregon Municipal Bond Fund of Merrill Lynch Multi-State Municipal
Series Trust as of July 31, 1998, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the four-year period
then ended and the period August 27, 1993 (commencement of
operations) to July 31, 1994. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at July 31,
1998 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Oregon Municipal Bond Fund of Merrill Lynch Multi-
State Municipal Series Trust as of July 31, 1998, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 11, 1998
</AUDIT-REPORT>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
Merrill Lynch Oregon Municipal Bond Fund during its taxable year
ended July 31, 1998 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, the following table summarizes the taxable ordinary
income distributions paid by the Fund during the year:
Record Payable Ordinary
Date Date Income
12/19/97 12/31/97 $.002961
There were no capital gains distributed by the Fund during the year.
Please retain this information for your records.
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1998
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Theodore R. Jaeckel Jr., Vice President
Gerald M. Richard, Treasurer
Robert E. Putney, III, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
